How to Prepare IRS Form 8396

If you were issued a qualified Mortgage Credit Certificate (MCC) by a state or local government under a qualified mortgage credit certificate program, you may be entitled to take a credit for qualified mortgage interest paid. Certificates issued by the FHA and other federal agencies do not qualify for the credit. The certificate must be issued for your main home, and it must be located in the area of the governmental unit that issued the certificate.

Instructions

Difficulty: Moderately Easy

1. Download Form 8396 Mortgage Interest Credit from the Internal Revenue Service (IRS) website.
2. Complete the information on the form as it is shown on your income tax return. Put the name of the issuer of the MCC, certificate number and the issue date in the applicable sections.
3. Enter the interest on the certified mortgage amount in Line 1 and the certified credit rate on Line 2. The credit rate cannot be less than 10 percent or more than 50 percent and it will not be the same as the interest rate on your home mortgage.
4. Refer to the Form 8396 instructions for the amount to enter on Line 3 if Line 2 rate is more than 20 percent or you refinanced your mortgage. Otherwise, multiply Line 1 by Line 2 and enter the amount on Line 3.
5. Reduce your home mortgage interest deduction on Schedule A or F of tax return Form 1040 by the amount on Line 3.
6. Add any credit carry-forwards from prior years and compute the current year mortgage interest credit which will be entered on Line 54 of your Form 1040 tax return. If part of the credit is not currently usable, show those amounts of excess mortgage interest credit as carry-forwards to the subsequent year.